MSNBC Says AOL Should Buy Apple

By Bryan Chaffin

Feb 7th, 2001 3:00 PM EST

One of the only thing more frightening to most Mac users than a world without Apple is a world where Apple would be owned by Microsoft. The only thing worse than that would have to be a world where Apple is owned by AOL. That, however, is exactly what Elliot Zaret, a columnist at MSNBC is suggesting.

Mr. Zaret says that AOL needs a media player of its own to leverage all the music, movies, and other entertainment titles AOL/Time Warner own. With QuickTime being one of the best on the market, owning Apple offers AOL the best way to fight Microsoft and the Windows Media player. Besides, the iMac could sold at a loss to increase market share and bundled with Netscape to provide a complete Internet delivery vehicle for AOL/Time Warner that is wholly owned by them. According to Mr. Zaret:

You may ask: Why would AOL want QuickTime and not RealPlayer? The answer is that with Apple comes so much more. QuickTime would be the main reason to buy, but not the only one. Not even close.

First of all, Apple is cheap. With a market cap of $6.7 billion, Apple would be an easy pill to swallow for AOL Time Warner and its $113.4 billion market cap  even if Apple demanded to be bought at a premium and drove up the price to $10 billion. Apple made about $400 million in revenues over the last 12 months, so it would take a while to make up the cost. But the revenues would surely increase with the synergies between the two companies:

Take a look at the iMac. All sorts of words are thrown around for the cute and colorful computers  personal desktop computer and Internet appliance  but the iMac is really a new media device. Along with the iMovie and iTunes software, and soon the SuperDrive that reads and writes to both CDs and DVDs, the iMac is made for music and video downloads and viewing.

It would be the perfect device for AOL to feature its music and videos. Itis also a family-oriented computer with its easy setup and colorful décor, which would fit AOLis image like a glove. Itis even triangle-shaped (from a side view), a lot like the AOL logo. The iMac could easily become the AOL TV set and jukebox.

And under AOL, the iMac could be sold as a loss leader  that is, sold for an initial loss, knowing the company will make up the revenue in spades with future services. Knock $400 off the price of an iMac and you have a $300 media center. Suddenly, Appleis market share would skyrocket. That, of course, would hurt Microsoft and put a big kink in the Windows dominance.

Mr. Zaret goes on to talk about how AOL could use Mac OS X in set-top boxes and how AOL and Apple have a long history together. He also (erroneously) states that AOL has a good history with providing timely Mac releases of their software.

Oh great gods that control the universe! Strike the words of this unbeliever from existence! Seriously though, this is one of the most frightening things we have come across since George W. Bush "won" the election. Mr. Zaret obviously respects Apple, something that is somewhat unusual in a mainstream tech-columnist, but he clearly does not understand the company. Nor does he truly understand AOL.

First of all, letis separate what is good for Mac users and what is good for Appleis shareholders. Whatis good for Appleis shareholders is for their investment to be maximized. If AOL were to cough up 2-3 times Appleis current share price, that could be considered good for them. Mac users, need something entirely different, and Mr. Zaret is not arguing his case from that stand point. For that reason, we arenit going to attack his views from that stand point. We will, however, point out why he is wrong.

AOL has a terrible track record for making good use out of companies they purchase. Netscape, for instance, has been utterly ruined by AOL. All the top engineers left the company long ago, and the companyis browser is considered a joke by many. AOL bought Netscape not to protect their browser, though that is a popular misconception, but to buy the companyis Web traffic. Yep, all the traffic that was being funneled into Netscapeis NetCenter was coveted by AOL during a time when eyeballs = prestige + cash. What they failed to understand is that the only reason NetCenter got so much traffic was because Netscape had such a dominance in the browser market to begin with. As soon as people started dropping Netscape in favor of IE, NetCenteris traffic evaporated in a puff of Yahoo!

The same thing would happen at Apple if were bought by AOL. Appleis product line would be reshaped to meet the high volume of the lowest-common dominator and all of Appleis remarkable engineering staff would join the rest of the dot-commers in the virtual lines at Monster.com. Who actually thinks that Jonathan Ives is going to be able to make the coolest industrial design on the planet for a company like AOL? He could do some amazing things at a company like Frog though, or about 150 other companies that still do cool things.

In conclusion, Mr. Zaretis reasoning is sound from the view point of what is good for AOL (even though it contains some factual misunderstandings), but that would only be the case if Apple could continue doing the things it does under AOLis management. That simply is not possible. Mr. Zaret does somewhat acknowledge this in his conclusion:

So an Apple-AOL deal makes total sense. The only problem is that it will probably never happen. The reason is simple: Steve Jobs. As much as the Apple founder and CEO is a visionary, he is also a control freak. It is almost impossible to imagine him taking orders from Case and Pittman. If AOL were to buy Apple, Jobs would likely leave. And as we learned in the early 90s, Apple without Jobs is Insanely Mediocre.

He is right, but there is more to it than that. Hopefully, this nightmare will never come to be. For Mac OS X to be converted into a consumer dribble cup is nothing short of criminal.